Three Rules For Consistent Forex Success

Aug. 16, 2009 - PRLog -- There has been a lot of myth and confusion recently about the Forex market. Some say it is a scam, some say it is too dangerous, and some even say that it is purposely set up by large financial institutions to bleed money away from individual investors, like you and me.

Fortunately none only one of these is true, and that is the inherent risk. Putting your money anywhere these days (except in a coffee can buried in your backyard) comes with some degree of risk. The good thing about risk is that with higher risk comes higher chance of profit. http://tinyurl.com/nbnx46

And the corresponding aspect of risk is there are many ways to manage risk, while maximizing your potential for profit. With a strategically developed risk strategy, coupled with a consistently executed plan of trading, the risk can virtually become negligible and your success inevitable.

Here are three solid steps that can help you in this regard.

One - Understand the markets.

You'd be surprised how many people invest in something like Forex without fully understanding the structure and mechanics of the market. If all you want to do is strike it rich, you will likely have difficulty. By understanding the market you are investing in, you'll have much better control over the risk. Economic and political factors, even the weather all play a part in certain markets. At the very least you should be aware of these factors before putting your money at risk.

Two - Be aware of your own personal downside limits

This means knowing exactly at what point you will get out due to a position that moves against you. Some stick with a solid five percent rule, some even tighter, at two or three percent. By sticking to a consistent, solid stop loss, you will always live to fight another day.

Three - Know when to take a profit.

I knew a guy once that was proud that he made over eighty thousand dollars in only a couple of weeks in a certain commodity. I asked him what his final profit was, and he admitted that after watching it go up, he watched it go right back down to nothing. When you stick to a consistent, unbreakable rule of when you will take profits, you will consistently, over the long run, make money. This can be tempting to watch a position keep going up and up. The temptation to hang on for the ride can be difficult to resist. But it must be resisted. Remember, your goal should be to make consistent money over the long haul, not strike it rich in one trade, despite how good that makes you feel. A good rule of thumb I usually stick to is get out, no matter what, at a twenty five percent profit. Some hang in for forty or fifty percent, it's up to you. The important thing is to choose a target for each and every trade, and stick to it. No matter what.

These three simple but powerful rules will go a long way in making it incredibly easy for you to make consistent profits in the Forex market. Those that have adopted and stuck by these rules know how lucrative they really are. After you make these rules part of your everyday trading strategy, you will be amazed how well they actually work, to your financial benefit.

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